Insurance Bid Rigging Settlement Reached

AUSTIN - Texas Attorney General Greg Abbott today announced
Texas and 10 other states have reached agreed final judgments with one
of the world’s largest insurers, requiring the company to implement a
variety of business reforms and refund $9 million to Texas commercial
policyholders as part of an antitrust settlement initiated last March.

Today’s
filing in Travis County District Court grants the Attorney General
broad enforcement authority over the previously announced settlement
with Zurich American Insurance Co. and its U.S. subsidiaries.

The
multi-state investigation alleged the company participated in
widespread, deceptive bid-rigging, price-fixing and other schemes in
the commercial insurance market, orchestrated by Marsh & McLennan
and other large brokers. In the process, large and small companies,
nonprofit organizations and government offices that purchased
commercial lines of insurance from Zurich were misled into believing
they were receiving the most competitive commercial premiums available.

“Anti-competitive
business practices will not be tolerated in Texas,” said Attorney
General Abbott. “Today’s settlement brings greater transparency and
fairness to the commercial insurance markets in Texas and across the
nation. This settlement paves the way for states to protect businesses
from falling victim to the kind of deception that raised insurance
prices above competitive levels.”

Texas led the 15-month
investigation, which revealed that Zurich conspired with brokers at the
center of the conspiracy in a “pay-to-play” scheme to overcharge
policyholders for their commercial insurance policies. The scheme
devised by broker Marsh & McLennan gave commercial policyholders
the illusion of a legitimate competitive bidding process on policies.
In fact, Marsh had secretly pre-designated certain insurers to win
bids, but the results for the policyholders were actually inflated
rates, not competitive bids. The scheme was successful because insurers
such as Zurich failed to disclose to policyholders that it paid secret
“contingency commissions” to insurance brokers.

The states
contended that Zurich showed a willingness to submit fake quotes and
was rewarded with protection from competition so it could set
artificially high premiums and profit on other lucrative accounts. The
brokers also engaged in anti-competitive conduct by steering contracts
away from insurance companies that refused to participate in the scheme.

In
a companion settlement of a class action lawsuit in New Jersey, Zurich
will be required to distribute about $122 million in refunds to
commercial policyholders, including an estimated $9.3 million to
Texans. These policyholders can obtain information about this class
action settlement by accessing
www.insurancebrokerageantitrustlitigation.com/zurich/

Today’s
Texas settlement eliminates these schemes, requiring the disclosure of
all compensation paid to brokers and agents. This information will be
helpful to policyholders in making decisions on obtaining or renewing
insurance with Zurich.